Dividend reinvestment means that when the fund pays dividends, the cash distributed is converted into fund shares and continues to be invested.

Therefore, this dividend method is suitable for value investors, customers who have no short-term need for cash, and are optimistic about the market outlook during the adjustment period.

What is fund dividends: Fund dividends refer to an investment return method in which the fund company distributes part of the fund's income to investors.

Classification of fund dividends: Fund dividends can be divided into two types: cash dividends and dividend reinvestment.

1. Cash dividend method The cash dividend method is a dividend method in which the fund company distributes part of the fund income to fund investors in cash.

2. Dividend reinvestment method Dividend reinvestment method is a way for fund investors to reinvest the cash dividends received from dividends into the fund to obtain fund shares.

Which type of fund dividend is better: 1. First, let’s look at cash dividends.

The so-called cash dividend means that the fund distributes income to investors in the form of cash.

Although cash dividends appear to be actual gains, in fact, after the cash dividends are distributed, the net value of the fund will also decrease, so the actual assets of investors have not increased compared with before the dividends.

Cash dividends are actually equivalent to redeeming part of the fund and cashing in part of the fund's investment income, and redemption of the fund can also cash in the income.

The only difference is that there are no fees for fund cash dividends, while fund redemptions may also require certain handling fees.

2. Next, let’s look at dividend reinvestment.

Reinvesting dividends means using the cash dividends distributed by the fund to investors to purchase the fund. After the dividends are distributed, the number of investors' fund shares will increase.

However, because the net value of each fund will decrease, the total value of the funds held remains the same as before dividends.

Reinvesting the fund's dividends is actually equivalent to distributing a portion of the fund shares to investors.

There is also no handling fee for reinvesting dividends, so the value of the funds held will not be more or less than before the dividends, but the number of fund shares will only increase.

3. Summary.

The above two types of funds pay dividends, one is to obtain a certain cash flow, and the other is to obtain a certain fund share.

There is no absolute advantage or disadvantage depending on individual needs.

Cash dividends are suitable for investors who need to withdraw income from the fund on a regular basis. For example, they may need to use some money from the fund income for expenses every year. At this time, it is obviously better to choose cash dividends, so that they do not have to redeem the fund themselves.

Yes, you can also save some handling fees.

As for dividend reinvestment, it is suitable for investors who intend to invest in the fund for the long term.

If you are optimistic about a fund and plan to invest for the long term, then reinvesting dividends is much better than cash dividends.

Because reinvestment of dividends can allow assets to achieve compound interest growth, while cash dividends can only achieve simple interest growth, over time, the investment returns of the two will differ greatly.

Therefore, if it is a fund whose net worth can grow steadily and you want to get more investment, it is obviously better to choose dividend reinvestment.